Confidence returning with entry-level properties

Our experience at Lochore’s in recent weeks with listed properties hitting the market has highlighted the acute shortage of housing stock on Auckland’s North Shore priced at an entry level of $550,000-$800,000. The good news for these owners is that properties on the Shore pitched at first-home buyers and mum and dad investors are attracting a high level of interest.

We’re finding that many first-home buyers that are pre-approved and raring to go, simply can’t find the right property in terms of price and location. Add to this, Mum and Dad investors are another growing buyer sector, as they help family get into the market.

Many of these buyers have been persuaded against bidding at Auctions. They might well have to shell out $1200 to investigate an Auction property which they may miss out on. This includes say $600 for a building inspection and an independent Registered Valuation report of a similar amount may be required as well, particularly in the case of Kiwi Saver clientele. So buyers in this demographic are understandably reluctant to chase Auction properties.

Step up an accurate price guide method of sale!  Linked to an increasing shortage of well-priced properties, we are now receiving multiple offers within two weeks of launching an entry-level property on the market. Buyers are flocking to properties that have accurate price guides and are presented well. This is positive news which has not yet been reported on in the property media.

By way of examples, recently we received nine written offers within 7 days from the launch of a three-bedroom house in Glenfield. In Birkenhead recently we greeted over 50 parties through one of our property’s open homes over a single weekend. This reflects a positive shift in our North Shore market – but more at entry level.

So what is generating this demand? Obviously a current shortage of well-priced property that buyers can immediately act on. Also, record low interest rates are providing a stimulus and the Reserve Bank’s open stance to help to stimulate the economy will also help, particularly if they decide to lower the LVR restrictions for investors, a possible decision we have heard being considered in November. Time will tell. Clearly fixed rates of 3.5% are a terrific incentive for the buyer collective.

An exciting dynamic is starting to build. On Trade Me, one of our leading websites for marketing our properties, we started in Autumn with over 1700 properties for sale across the North Shore region. This number has dropped over Winter by a sizable 30% (or 500 properties) to a figure closer to 1200 now as we begin Spring. Normally we’d expect to get a flurry of new properties coming onto the market, which we refer to as the “Spring Flush”. At the entry level, there appears to be not enough properties to meet the demand.

What’s exciting for Vendors is that at last there’s some competition hotting up among first-time buyers, some of whom are now willing to pay a little bit more to ensure they secure a property with their pre-approved finances ready to go.

In addition, values have stabilised with the median price on the North Shore having “flat lined” through Winter at between $980,000 – $990,000.

When potential Sellers start seeing buyer confidence returning, this could be the catalyst for more action in the market and for some property investors who may have hung onto a property for years, look to capitalise and sell one to fund their retirement.

By Lochore’s guest blogger Chris Gemmell